Ad Week Wining & Dining Hints Of Optimism

The Advertising Week conference will exit from New York tomorrow, and if the events tonight are any indication, the industry has got its swagger back.

Getty Images

Recording artist Wyclef Jean performs at the Billboard Amp’d Up! opening concert and benefit for Generationext at the Nokia Theatre for Advertising Week.

Among the events is a launch dinner for stealthy venture-backed advertising company Permuto Inc. Held at The Mott, a trendy restaurant in downtown Manhattan, the dinner will be custom crafted, based on recommendations by the chef, and each course will be accompanied by a wine chosen by the restaurant’s sommelier.

Shortly after the dessert course, the revelry will likely move down the street to Tribeca Cinemas for the Facebook GeneratioNext Wrap Party. The invitation says “Advertising Week heads downtown for an old fashioned block party. Featuring special guest DJs.”

The advertising market may have fallen into dire straights this past year, but wine pairings and dance parties are a welcoming sign that happy days are ahead.

That was mostly the sentiment of investors speaking at the conference this week. They agreed that while media and advertising are in a major transition, at some point brands will need to communicate with customers and will rely on advertising agencies and new technologies to reach them. And, that means investing in advertising companies will remain a popular play.

Permuto, for example, managed to secure its $6 million round of funding in October while the economy was simultaneously crashing and advertisers were padlocking their wallets. But, the company offers a technology that puts the advertiser closer to the consumer when they’re in the buying mood, which is something brands are looking for more often. Permuto will look to partner with e-commerce and shopping comparison sites to provide more targeted display advertising to buyers showing a greater interest in an actual purchase.

Chief Executive Shaukat Shamim said the network reached 70 million unique impressions in 100 days of pre-launch, numbers worthy of a fancy night on the town with a few friends.

Meanwhile, Facebook is expected to generate more than $500 million in revenue in 2009 from advertising. The company had 9.1% share of display-ad views in the U.S. in July 2009, up from 6.8% in January 2009, according to comScore Inc. That put it in second place behind Yahoo and ahead of both Microsoft Corp. and Time Warner Inc.’s AOL unit, which had shares of 5.7% and 3.6% respectively, comScore said. Facebook expects a 70% lift in revenue from 2008, a major accomplishment in a down ad market and more than enough reason to throw a party in New York.

Facebook’s accomplishments are also great news for investors who poured billions into digital media start-ups banking on advertising as their moneymaker.

During an Advertising Week panel titled “Show Me The Money,” Bain Capital Managing Director Ian Loring said private equity investors have been forced to deal with three major themes in the past year – a lack of leverage, an advertising slowdown and a transition to new forms of media. “It makes it a real challenge to invest in the space,” Loring said.

But, Loring was bullish on the return of the advertising market and still believes it will remain an important focus for his firm.

“At some point people will have to talk to their customers,” Loring said on the prospects of brands opening their wallets for advertising.

The transition to new forms of media, particularly the Internet, is one of the chief reasons investors are licking their chops when looking at the advertising sector. Disruption creates opportunity. Shares of ad spend across print and broadcast channels will begin to find new buckets, such as mobile, digital out-of-home and social media platforms.

“It’s a very good time to be an investor,” said Aileen Lee, a partner at Kleiner Perkins Caufield & Byers. “It’s going to look very different five years from now in terms of how people buy and sell media.”

Richard Bressler, a managing director at Thomas H. Lee Partners, also has confidence in the advertising business, but recognizes that pinpointing the right investments in a rapidly evolving environment is difficult.

“We do have to change the way we do business,” Bressler said. “[Advertising] is going to come back, but it’s going to be dramatically different.”

But, if advertising doesn’t come back…well, at least there was tonight. Wine pairings and parties in New York.

About Venture Capital Dispatch

Produced by the editors of Dow Jones VentureWire, Venture Capital Dispatch tracks the fast-moving developments at the intersection of high-tech innovation and venture capital finance. Featuring the VentureWire reporting team in the Silicon Valley, New York, Boston and Shanghai tech centers, Venture Capital Dispatch provides insight into the newest start-ups and latest trends in venture capital investing. Write us at VCdispatch@dowjones.com. For more information on Dow Jones products covering venture capital and other financial markets, go to http://pevc.dowjones.com.